May 10, 2022

What is a Business Model?

Business Model Innovation
by Maximilian Böger

What is a Business Model?

business model is the foundation of a company that outlines how the business will generate value.

While a business model can be defined in very simple terms, the history, evolution, and hundreds of variations add immense complexity to the topic. Therefore, business owners, operators, and future entrepreneurs need to continue evolving their understanding of the business model to be successful.   

We've created this post to take a deep dive into what is a business model using examples from past and current successful companies.

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Breaking the boundaries of the business world

Before the widespread access to the internet, most business owners based their models on catering to a localized market. However, few companies had the capital to serve consumers globally, limiting the flexibility of their business model.

Once the internet became accessible, everything changed. Digitalization of the economy offers infinite potential for innovation.

In the 1990s, internet-based companies seemed to be on a trajectory of infinite growth until the dot com bubble burst, bankrupting hundreds of businesses. However, companies that were able to shift their model, such as Amazon, eBay, and Priceline, survived the crash.

Today we are witnessing another shift due to policy and changes in spending patterns created by the COVID-19 pandemic. As the economy becomes increasingly digital, companies must continue innovating and adapting to customer trends to survive.  

The Emergence of the Lean Start-Up 

After the dot com bubble, the companies that did survive expanded at a rate never seen before. As a result, more entrepreneurs entered the technology space with hopes of rapid growth. As a result, the startup business model grew in popularity, centering around the lean methodology that includes continuous innovation and built-in loops that react to customer feedback.

PayPal and Dropbox are among the best examples of the lean startup model replicated by hundreds of companies in the early 2000s. Both began as simple, innovative online services and have since expanded user adoption and value offerings.

Customer obsession dominates tech

One of the primary aspects attributing to the success of the lean startup model is the ability to adapt to customer feedback. Customer obsession refers to an organization that constantly seeks input from consumers and continuously improves the customer experience.

Amazon's #1 leadership principle is to collect data to gain a deep understanding of the customer's wants and needs, then adapt the model to accommodate its users. Customer obsession is a fundamental component of modern technology companies because the lean model and access to data have allowed operators to adapt to the market quickly. If you aren't learning from the customer, a competitor will inevitably find a competitive advantage.

What is a business model, and why is it important?

A business's model is at the center of how the company operates, adapts to new revenue streams, broadens its customer base, and retains revenue.

The scalability allowed by the internet makes the business model more important than ever. Companies can introduce exciting new ideas, ways to reach consumers, and add value through the company's framework.

A quick history of business models

Throughout history, businesses have always followed a model. One of the earliest examples is from the early 20th century; the 'bait and hook' or 'razor and blades' model includes offering a basic product at a loss and then recovering the loss through reoccurring payments or supplemental products.

Dollar Shave Club has developed the modern version of the razor and blades model by literally selling razors and other high-end shaving products. We did a full breakdown of the company and model in our blog; check out the article for more information.

The franchise is one of the most prominent models to gain popularity before the dot com bubble. McDonald's, Ikea, and Ryanair are excellent examples of how retail businesses can be replicated all over the world once the model is validated.

 Read: A SWOT Analysis of the Furniture Giant: What are the Strengths of IKEA

Why A business model is not a business plan

Many inexperienced entrepreneurs confuse the term business model with a business plan. The major difference is in the specific structure.

A business plan is a document that thoroughly explains a business's goals and how the organization will meet those metrics over time. Critical aspects of a business plan include:

  • Business description and summary

  • Market analysis

  • Competition overview

  • Operating plan

  • Product/services descriptions

  • Marketing strategy

A business model is a more broad, less concise term consisting of how the organization will reach consumers without a direct plan for financing, revenue growth, operations, or marketing.

Difference between a business model and business plan

If we look at the McDonald's franchise business model, we can observe the difference between the model and the plan.

McDonald's franchises restaurants to business owners worldwide to capture market share and continue to grow. The franchise owner pays an upfront fee along with revenue sharing and, in turn, gains access to branding, supply chain, operations procedures, and other essential aspects of the business.

A McDonald's business plan would be the document presented by the prospective franchisee owner to outline how they would become economically viable in a specific market. The plan would include plans for a location, financing, hiring procedures, management structure, employee compensation, and other variables that would be unique to their specific restaurant.

A business model is not a revenue generation strategy

Another misconception is that a business model is strictly a revenue generation or monetization strategy. While how a company creates profit and plans to continue to grow are critical components of a viable business model, it is one aspect of a larger strategy. 

Is a business model a business strategy?

A business strategy is a plan that outlines how a company will compete in a specific market. Companies typically create a general overview of marketing, operational, and financial strategies.

Clay Christensen ©Harvard Business Review

Business models differentiate from a business strategy because a model is less in-depth. Harvard Business School's Clay Christensen suggests that a business model should consist of four elements:

  • Customer value proposition

  • Profit formula

  • Key resources

  • Key processes

A business model should include the elements; however, it doesn't require an analysis of each component of the model.

Why business models matter?

The business model is the foundation for every company, outlining how the enterprise will navigate and deliver value in a market.

TikTok, the increasingly popular Chinese social media platform, utilizes a prosumer business model. The company focuses on keeping users engaged by creating a stimulating user experience, but the app doesn't produce videos. Instead, TikTok relies on user-generated content to populate the feed and provides the technology to encourage engagement.

The business model is at the center of TikTok's success. Developers focus on improving the social media experience with content creation technology and an algorithm that offers nearly every user the opportunity to go viral.

Why are business models important?

TikTok's business model is important because it separates the platform from other social media companies. For example, Facebook and Instagram moved away from catering to the individual and focused on creating revenue through brands spending on paid advertising. TikTok's model empowers the common user through the algorithm and innovative tools to help videos go viral.

The importance of business model design

Business model design defines an organization's logical rationale for implementing business strategy. For example, Dropbox started as a simple application that gave everyday users access to cloud storage. Once the startup proved its dominance of the niche, the model shifted to include more services such as eSignatures, document transfers, device backup, and the ability to sell digital products directly from Dropbox.

The lean design with a foundation centered around cloud computing allows Dropbox to continue to innovate and bring new services to market.

Business modeling is about experimentation

A new business model is similar to a hypothesis. An entrepreneur comes up with an idea and tests the business in the market like a scientist tests and validates a theory with research.

Apple is the perfect example of a company that benefited immensely because of experimentation and continues to do so. In the 1990s, Apple's business model focused on producing personal computers. Then, in 2007, Steve Jobs famously introduced the iPhone.

No one knew if a highly intuitive cell phone would meet the market's needs. Obviously, the market welcomed the idea, and the experiment was validated. Apple's rival, Microsoft, had to play catchup in the emerging smartphone sector and eventually discontinued its Windows phone in early 2016.

In January 2022, Apple became the first company to surpass a 3 trillion-dollar market capitalization.

Technological innovation vs. business model innovation

Companies like Apple continue to innovate the business model and deliver new products with added value. Tesla is another example of a company that has profited immensely from technological and business model innovation.

Tesla Advertisement ©Tesla

How Tesla benefits from technological innovation

Before the Tesla Roadster, the electric vehicle was virtually dead. However, once Tesla revolutionized large battery technology, EVs could drive further on one charge reducing range anxiety and becoming more practical for consumers.

Incorporating large batteries and improving energy utilization is an example of technological innovation. While enhancing the tech is a central piece of why Tesla has become so successful, it isn't the way the battery/software/EV company is beating out competitors.

Telsa's genius business model innovation

The rise of Tesla has not only changed how cars use energy but also how cars are sold. Instead of manufacturing thousands of vehicles, parking them at a dealership, and giving salespeople a commission on every car sold, Tesla implemented a D2C model. Consumers can choose and order their car online; once it is built, it is delivered directly to their doorstep.

Another example is Tesla's charging infrastructure. While the Superchargers are technological innovation, the idea to build chargers across continents, even in desolate, rural areas without a Tesla owner for hundreds of miles, is an example of business model innovation.

Read: An Excerpt From The Car Manufacturer's Business Model Canvas: Tesla

Why business model innovation matters so much

Change in consumer habits is inevitable. Policy, social issues, trends, and technology are constantly changing, making business model innovation and the ability for companies to adapt to the market incredibly important.

Let's go back to social media as an example of why business model innovation matters. In early 2010, Facebook seemed to have control over the market; however, the platform stopped implementing new technology to keep users engaged.

Instagram was launched in 2010, followed by Snapchat in 2011, taking significant market share from FB, especially in crucial, younger demographics. As a response, Facebook acquired Instagram and released IG and FB stories along with selfie filters in response to Snapchat.

For the next 5 years, Facebook, now known as Meta, regained control over the market thanks to the IG acquisition. But the tech company failed to recognize the value of short, user-generated video content. While users could upload a video to FB and IG, the platforms didn't provide the tools to create unique videos directly from their phones.

The failure to innovate welcomed a new player into the social media space. Today, TikTok surpasses 1 billion monthly users, still less than FB and IG but is growing at a much faster rate than the Meta-operated platforms.

Competitive moats are generated around business model innovation

Warren Buffet believes the "most important" factor when choosing a viable investment is the durability of a "competitive moat." The term refers to the company's competitive advantage in a market and the ability to retain the advantage long term.

When a new technology, like the internet, becomes accessible to consumers, novel business models will inevitably emerge. One of the most relevant is Netflix. The streaming company took advantage of high-speed internet in consumers' homes across the world.

After pivoting to streaming, Netflix maintained its competitive moat for over a decade. Even after other companies entered the space, Netflix invested in original content that kept users satisfied.

After Netflix reported losing over 200,000 subscribers in the first quarter of 2022 and over a million in Q2, the stock plunged nearly 40%. The news was a bombshell and signaled that Netflix's once seemingly impenetrable moat was dramatically weakened.

While Netflix's decline may have been inevitable, Google gives us an excellent example of creating a competitive moat with longevity. As of June 2021, 92.47% of all internet searches have been conducted through Google, showing complete dominance over the market.

Google's early understanding of the web, investment in infrastructure worldwide, and continuous access to an unfathomable amount of user data provide a truly impenetrable moat.

Business model innovation as a traction model

An essential aspect of a modern business is receiving feedback and making changes on the fly. Companies like Amazon and PayPal survived the dot com bubble because they could find the most profitable business model market fit. Both companies started with very different business models than how they are positioned in the market today. The rise of lean startups is due to the model's flexibility to receive customer feedback and make quick adjustments to stay competitive.

Jack Dorsey's company Block consisting of Square, Cash App, Spiral, and Tidal, offers an excellent example of an organization that utilizes the traction model.

Square began as one of many online payment processing companies. The model evolved to integrate seamlessly with eCommerce brands as well as brick and mortar retailers. Dorsey's vision for online payments grew to include person-to-person transactions with Cash App.

The billionaire tech entrepreneur continues to innovate as his businesses fit their market fit and gain traction. Cash App has grown to offer consumers the ability to purchase stocks and cryptocurrency.

As the technology sector evolves, blockchain and the metaverse appear to be the next emerging components with massive potential. Block is in an ideal position to capitalize on the shift in the space through financial technology with Square, Cash App, and Spiral. In addition, Tidal offers an exciting opportunity to leverage decentralized ownership on streaming platforms. Financial services and digital content will be two critical components of metaverse technologies.

Check out our article The 7 Metaverse Opportunities You Shouldn't Miss for more on the exciting new technology.

Dorsey demonstrates he understands a flexible business model is needed to survive. Once his companies find their market fit, he expands, the perfect example and execution of the traction model.

What are the primary components of a business model?

As mentioned, business models are highly diverse and continuously changing in reaction to the market. However, a business model's primary components demonstrate commonalities among successful examples. The business model canvas is a framework for visualizing and structuring models created in the 2008 book Business Model Generation by Alexander Osterwalder and Yves Pigneur.

Airbnb Business Model Canvas ©

Below are the nine building blocks and a brief explanation of every successful business model according to the business model canvas.

Key Partners – Suppliers that offer strategic relevance to the business model.

Value Proposition - "Think of the Value Proposition as a contract between the customer and your company where the customer 'hires' your company to solve a problem." Clayton Christensen

Customer Segments – A business's customers and target groups

Cost Structure – Significant cost blocks and structures.

Revenue Streams – All methods of generating revenue.

Key Activities – Operations essential for growth

Customer Relationships – Maintaining customers rather than paying exponentially more to acquire new consumers.

Key Resources – Aspects of the model that are crucial for success (employees, technology, patents, facilities, etc.).

Channels – HOW customers are reached and how they purchase products in the market.

The business model canvas perspective 

The business model canvas offers structure and encourages collaboration to an abstract concept. Laying out the building blocks tangibly exposes flaws and helps teams understand the model on a high level.

If you are interested in learning more about the concept, read our blog post, Business Model Canvas Compact – Structure, Explanation, and Examples. Here we cover each component of the business model in-depth and how to use the business model canvas to analyze and develop your business model.   

The business model navigator perspective

Another popular method to analyze business models is the business model navigator. The concept was invented at the University of St. Gallen in Switzerland and focuses on innovating business models rather than just products and services.

The Business Model Navigator ©

The business model navigator offers a meta-perspective broken down into 4 questions:

  • Who are the target customers?

  • What is the benefit?

  • How is the benefit created and delivered?

  • How does the company earn money?

St. Gallen's business model navigator is less detailed than the business model canvas and is often used as a starting place when formulating or analyzing models.  

The mix of both worlds

Answering the questions outlined by the business model navigator directly answers the most important aspects of the model and how what areas need to be innovated. As a result, the business model canvas is a much more thorough examination.

We suggest utilizing both frameworks starting with navigation. Once you've determined the fundamentals of your business model, a complete analysis with the business model canvas should be conducted.

Remember that a successful business model needs to be positioned to adapt and innovate. The most profitable organizations, especially since the internet, continue to demonstrate the ability to pivot based on feedback from the market.

How many types of business models exist?

Narrowing down an exact number of business models is impossible but for us there are 108 patterns. New models are being tested every year, and old models evolve in real-time.

In addition, most companies don't fit just one type of model. For instance, the streaming app Spotify applies multiple business model patterns, including freemium, accessibility, and mass customization.

While Spotify is the largest music streaming service with a market share of over 30%, the company continues to innovate its business model. In the past 5 years, Spotify has shifted its focus on podcasting and secured some of the largest shows through exclusive licensing deals.

There are hundreds of business model patterns and new ones emerging every year. The important takeaway is not the amount but the need for models to adapt and innovate.  

Vision vs. mission: why understanding the difference between them is important

While a business model and the company's mission are constantly changing, the vision rarely changes course.

To understand the difference between the two types of business statements, let's look at Spotify.

Spotify's Vision Statement:

"We envision a cultural platform where professional creators can break free of their medium's constraints and where everyone can enjoy an immersive artistic experience that enables us to empathize with each other and to feel part of a greater whole."

Spotify's Mission Statement:

"Unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by these creators." 

We see how the vision statement describes Spotify's goals for the future, and the mission statement outlines how the streaming platform conducts business.

The vision focuses on more broad elements like culture, constraints of a medium, and the artistic experience. Spotify's mission statement is more focused on the opportunity for the individual artist and the fan's experience.

Spotify's recent moves into licensing demonstrate the mission statement by allowing artists to live off their art but still align with the broader goal of unlocking the potential of human creativity.

Business model examples

Business Model Ideas features over 150 hand-picked business models from the most successful companies in the world. Our experts offer a complete breakdown of each model, including:

To give you an idea of what Business Model Ideas offers, we've included three short case studies below from companies featured in our database.

Only Fans Business Model

OnlyFans Logo ©onlyfans

Only Fans is an online platform that allows content creators to monetize their content. Creators set a subscription price to view their content and offer add-ons for additional fees. Only Fans keep 20% of the revenue, allowing influencers to profit from their online following without partnering with brands.

The rise of the social media influencer paved the way for Only Fans. Instagram, Facebook, and Snapchat users accumulated an incredible number of followers in short periods but weren't earning revenue directly from the social media companies. As a result, influencers were forced to partner with brands to monetize their followings.

Only Fans capitalized on the opportunity by offering influencers a place to monetize adult content. The platform leverages content creators and profits from their communities.

The Only Fans business model is highly innovative. Other social media platforms rely on advertising rather than users paying a subscription fee as the primary revenue source. While Only Fans is known for adult content, some creators use the platform to release exclusive content not available on their other social media channels.

The most prominent example is Cardi B. After the prevalent New York recording artist joined the platform, her account skyrocketed, earning the artist over nearly 10 million USD per month.   

Digitalization due to the COVID-19 helped Only Fans grow significantly over the past few years. At the end of 2021, Only Fans had over 170 million registered users. Platforms like Only Fans and Patreon, with business models that empower the creator through the subscription model, could be the future of online content.

HBO Business Model

HBO Logo ©hbo

While Only Fans shows us a completely novel business model only made possible out of the evolution of the internet, HBO has been around since 1972.

Before the internet, HBO revolutionized how consumers viewed video content by pioneering the concept of premium content. After decades of dominance due to continuously producing high-quality programming, streaming changed the game.  

HBO missed the initial rise of streaming content and was dramatically affected by Netflix being first-to-market. However, after an unsuccessful effort at streaming with HBO GO and the rebrand of HBO Max, the legacy premium cable company has regained dominance in the TV and movie production industry.

Releasing premium content has always been at the heart of HBO's business model; however, the rise of streaming has reshaped the company. Before HBO Max, the premium cable provider was primarily known for producing quality television. After witnessing Netflix build a production studio from nothing and releasing its own content exclusively on its platform, HBO shifted its business model, expanding to producing and releasing blockbuster films.

In 2022, Netflix is bleeding subscribers primarily due to HBO's ability to adjust its business model and capitalize on new consumer trends.  

Roblox Business Model

Roblox is a global game creation platform that allows users to program and play games created by other users. Players can play existing games or create their own without limitations while collaborating with other Roblox users through various chat functions.

The platform is far from just another online game with an expansive, interactive map. Roblox game designers can generate income from the games they create through the platform's digital currency, Roblux.

Roblox's success is thanks to its innovative business model. Instead of creating another online game, Roblox designers built new technology that birthed a loyal community. With new gaming abilities and an opportunity to generate revenue on the platform, Roblox users are some of the most passionate users in the gaming community.

For many people, Roblox is a realistic view of what the so-called "metaverse" will actually look like. While Meta is dumping billions into creating VR, Roblox is revolutionizing existing technologies and empowering users.

Many business models becoming increasingly popular center around the user. Roblox is just one example of how Amazon's attention to consumer feedback has evolved. The next evolution of the consumer-obsessed lean startup focuses on giving users the tools to create and monetize content.  

Reverse engineer any business model

Identifying areas that can be improved is difficult once a business is operational. Reverse engineering or conducting business analysis is an excellent method to expose areas that can be optimized or identify opportunities for innovation.

Business Model Ideas helps entrepreneurs and business operators learn from successful companies and implement similar methods into their models. As we've mentioned in the article, even the most prominent companies fail to understand the market and capitalize on new opportunities.

Conducting regular business analysis is a necessary practice for every organization.

Key takeaways for developing a successful business model

Innovation has always been at the center of developing a successful business model, but today it is critical due to rapid digitalization. New technologies are emerging overnight, offering opportunities for entrepreneurs to capitalize.

You don't need to revolutionize the automobile or build a digital online gaming world to create a successful business model. However, your model needs to be structured to adapt and capitalize on consumer feedback and changes in the market.

Key topics we covered

  • Digitalization of the economy and the rise of the lean startup

  • Amazon's customer obsession and dedication to reacting to consumer feedback

  • A business model is not a business plan or a revenue generation strategy

  • The importance of business model design

  • Experimentation is central to business modeling

  • Technology innovation is separate from business model innovation

  • The importance of competitive moats

  • Identifying opportunities for innovation and the traction model

  • Utilizing the business model canvas and business model navigator perspective

  • The difference between a vision and mission statement

List of 108 business models (from Business Model Ideas)

  1. 1 Asses > Multiple Businesses Business Model

  2. 1 Asset > Multiple Customer Segments Business Model

  3. Accessibility Business Model

  4. Add-On (Extras) Business Model

  5. Advertising Business Model

  6. Affiliation Business Model

  7. Aikido Business Model

  8. Auction Business Model

  9. Barter Business Model

  10. Cash Mashine Business Model

  11. Circular Economy Business Model

  12. Collaborative Consumption Business Model

  13. Collaborative Production Business Model

  14. Commision Business Model

  15. Community Business Model

  16. Complementary Offerings Business Model

  17. Convenience Business Model

  18. Cost Reduction / Affordability Business Model

  19. Crowdfunding Business Model

  20. Crowdsourcing Business Model

  21. Customer Initimacy Business Model

  22. Customer Loyality Business Model

  23. Customization Business Model

  24. Desegmented Business Model

  25. Design Business Model

  26. Digitalization Business Model

  27. Direct Selling Business Model

  28. Distribution Business Model

  29. Do-it-yourself Business Model

  30. Donation Business Model

  31. Dynamic Pricing Business Model

  32. Ease of Use Business Model

  33. E-Commerce Business Model

  34. Efficiency Business Model

  35. Emotions (Image) Business Model

  36. Experience Selling Business Model

  37. Features Business Model

  38. Fixed Prices Business Model

  39. Flate Rate Business Model

  40. Franchise Business Model

  41. Free Business Model

  42. Freemium Business Model

  43. From Fixed to Variable Costs Business Model

  44. Frugal Innovation Business Model

  45. Gamification Business Model

  46. Getting Things Done Business Model

  47. Guranteed Availability Business Model

  48. Hidden Revenue Business Model

  49. Horizontal Expertise Business Model

  50. Indirect Selling Business Model

  51. Ingredient Branding Business Model

  52. Integrator Business Model

  53. Layer Player Business Model

  54. Least Satisfied Business Model

  55. Leverage Existing Customers Business Model

  56. Licensing Business Model

  57. Lock-In Business Model

  58. Long Tail Business Model

  59. Marginal Costs Business Model

  60. Mass Customization Business Model

  61. Mass Market Business Model

  62. Most Profitable Business Model

  63. Most Satisfied Business Model

  64. Multi-Channel Business Model

  65. Multisided Platform Business Model

  66. New / Different Acitivities Business Model

  67. New / Different Links Between Activities Business Model

  68. Niche Market Business Model

  69. No Frills Business Model

  70. Non-Customers Business Model

  71. Novelty Business Model

  72. Object as Point-Of-Sale Business Model

  73. Object Self Service Business Model

  74. Open Source Business Model

  75. Orchestrator Business Model

  76. Outsourcing / Insourcing Business Model

  77. Ownership vs. Access Business Model

  78. Pay-per-Use Business Model

  79. Pay What You Want Business Model

  80. Peer-to-Peer Business Model

  81. Performance Business Model

  82. Performance-Based-Payment Business Model

  83. Price Business Model

  84. Product as a Service Business Model

  85. Prosumer Business Model

  86. Razor and Blade Business Model

  87. Rent Instead of Buy Business Model

  88. Revenue before cost Business Model

  89. Revenue Sharing Business Model

  90. Reverse Engineering Business Model

  91. Risk Reduction Business Model

  92. Sales Business Model

  93. Segemented Business Model

  94. Self-Service Business Model

  95. Sensor as a Service Business Model

  96. Service as Product Business Model

  97. Shop-in-Shop Business Model

  98. Solution Provider Business Model

  99. Sponsoring Business Model

  100. Subscription / Memebership Business Model

  101. Supermarket Business Model

  102. Sustainability Business Model

  103. Ultimate Luxury Business Model

  104. Unbundling / Bundling Business Model

  105. User Designed Business Model

  106. Vertical Integration Business Model

  107. Virtualization Business Model

  108. White Label Business Model

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150+ Business Model Examples

Browse 150+ models at business model ideas

We believe that there is an immense amount of knowledge to be learned from existing business models. Entrepreneurs, operators, owners, and influencers can benefit from reviewing business models from the past and present to understand what has worked and where companies have missed opportunities.

At Business Model Ideas, we collect critical information on over 150 companies describing how they are positioned in the market. Our subscribers have access to a full business model canvas, patterns, SWOT analysis, expert insights, and marketing analysis for every company in our database.

Visit Business Model Ideas today for more information on our platform, and feel free to reach out if you have any questions.

Business models FAQs

What is a business model?

A business model defines how a company will offer value to its target market. The process of creating and modifying is called business model innovation and is essential to the success of an organization.  

What is a business plan?

A business plan differs from a business model. The plan is a document that defines how a business will achieve its goals and offers a prediction for future growth.

The difference between a business model and a plan is the model provides the foundation for the company, whereas the plan describes the structure.

What is a business model example?

Below are three business model patterns from business model ideas:

Freemium model – The business offers services for free but requires payment for additional value. Many SaaS and online companies provide a free and paid version of their services. LinkedIn, Tinder, Skype, and Spotify are examples of a freemium model.  

Franchise model – A successful business can offer the model to other operators for a fee. Franchise owners gain access to essential aspects of the business such as branding, advertising, operations, structure, and equipment. McDonald's, Burger King, and ScribeAmerica are all examples of the franchise model.

Circular Economy – Businesses that use product materials by recycling or repurposing materials. The materials have a much longer lifespan and help the company reduce waste. Freitag, Living Packets, and On Running utilize a circular economy business model.   

What is a business model canvas?

The business model canvas is a framework for visualizing and structuring models created in the 2008 book Business Model Generation by Alexander Osterwalder and Yves Pigneur.

Creating a business model canvas includes grouping key aspects of a business into 9 categories.

The practice involves building out a visualization encouraging collaboration and helping identify areas needing improvement.

What are the 9 building blocks of a business model canvas?

The 9 building blocks or categories in a business model canvas are customer segmentsvalue propositionschannelscustomer relationshipsrevenue streamskey resourceskey activitieskey partnerships, and cost structure.

What is business model navigator?

The business model navigator is a simplified framework to develop business models created by the research institute at the University of St. Gallen in Switzerland. The framework consists of 4 questions to help develop models, identify existing problems, and encourage innovation.

What are the questions used in the business model navigator?

A business model navigator consists of 4 questions:

  • Who are the target customers?

  • What is the benefit?

  • How is the benefit created and delivered?

  • How does the company earn money?

What is the importance of a business model?

Business models are important because they offer the foundation for how a company reaches customers in a market. Understanding an organization's business model helps develop a value proposition. A continued realization of the model will encourage innovation and help the business adapt to the market.

At Business Model Ideas, we believe every business can benefit from business model analysis. We provide over 150 business models so business owners and operators can learn from other companies and apply elements to their models.

What is business model innovation?

Business model innovation is continuing to enhance a model and increase its value in the market. Successful businesses demonstrate the ability to evolve the value proposition and the mechanism of reaching consumers.

What is the difference between a vision and mission statement?

A vision statement is a passionate declaration of how a company wants to be positioned and viewed. Vision statements are typically idealistic and emotional.

Mission statements describe the products, services, or platform a company provides while outlining the organization's values and reason for existing.

A vision statement and mission statement are similar concepts and can even have overlapping elements. The main difference is a vision statement focuses on the future, whereas a mission statement describes the company's position today.

While mission statements are often changed or tweaked, the vision rarely differs.

Visit Business Model Ideas for more information on specific business models, patterns, and expert analysis.